Investing in Corporate Social Responsibility to Enhance Customer Value

by Noam Noked for The Harvard Law School Forum, February 28th, 2011.

Corporate social responsibility (CSR) activities have the potential to create several distinct forms of value for customers. It is the customer perception of this value that mediates the relationship between CSR activities and subsequent financial performance. By categorizing major CSR activities and the different types of value each can create, this report offers a number of practical recommendations to business leaders embarking in CSR programs for their companies.

Investments in CSR activities are under scrutiny. Boards and shareholders are increasingly demanding that outcomes from these investments be measured to understand if and how they positively impact the profitability of the firm. Not surprisingly, a significant amount of research has been undertaken to understand the relationship between CSR and profitability.

Due to the importance of customers among business stakeholders, marketing research that examines the effects of CSR on profitability is particularly informative. In particular, this research shows that CSR leads to outcomes such as increased customer loyalty, willingness to pay premium prices, and lower reputational risks in times of crisis. [1,2,3] Each of these marketing outcomes in turn has the potential to support increased profitability. (continue reading… )

 

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